Alger, an investment management firm, published its “Alger Weatherbie Specialized Growth Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. During the third quarter, the largest portfolio sector weightings were Information Technology and Health Care. The largest sector overweight was Financials. The portfolio had no exposure to the Communication Services, Consumer Staples, or Utilities sectors. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Alger, in its Q3 2021 investor letter, mentioned Paylocity Holding (NASDAQ: PCTY) and discussed its stance on the firm. Paylocity Holding is an Illinois, United States-based software company with a $16.1 billion market capitalization. PCTY delivered a 42.92% return since the beginning of the year, while its 12-month returns are up by 54.23%. The stock closed at $294.28 per share on October 22, 2021.
Here is what Alger has to say about Paylocity Holding in its Q3 2021 investor letter:
“Paylocity Holding Corp. was among the top contributors to performance. Paylocity is a leading software-as-a-service company that provides cloud-based payroll and human capital management in underserved small to mid-size markets. The majority of new sales activity is with employers that have 50 to 500 employees. Paylocity’s earnings results released in August were positive with improved demand for its products. Sales momentum was also strong with a 28% year-over-year increase for the second quarter, which exceeded consensus expectations. In another positive development, the amount of time required to establish initial meetings, receive decisions from potential clients and complete implementations has returned to normal following previous challenges resulting from the pandemic. The company also reported that the number of employees on the platform has largely recovered, although not yet to 100% of the level prior to COVID-19.”
Based on our calculations, Paylocity Holding (NASDAQ: PCTY) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. PCTY was in 19 hedge fund portfolios at the end of the first half of 2021, compared to 22 funds in the previous quarter. Paylocity Holding (NASDAQ: PCTY) delivered a 44.46% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
